Both companies share innovation-focused engineering cultures. “It is a company that we have long admired, and we are confident in the cultural fit of our two companies,” said Lal Karsanbhai, president and chief executive officer of Emerson, who added that both companies are aligned on strategic and financial objectives, and it came down to the best execution of the deal. The extensive due diligence and synergy planning took place for two months prior to the final deal, which was announced April 12. “As you know, this transaction is the culmination of very competitive process,” Karsanbhai said.
Just as the two companies’ culture and strategy match, the two share space in similar markets. The test-and-measurement market, which NI has prospered, is growing fast; Emerson sees this as accretive to its end-market exposure. Both businesses are poised to capitalize on similar industry trends: reshoring, digital transformation, sustainability and electrification.
“Sustainability and decarbonization macro trends are driving investments in electrification, leading to funding for electrical vehicles and battery technology,” explained Karsanbhai. “Digital transformation is increasing demand for semiconductors and electronics. Nearshoring is also increasing investments in areas like semiconductors and battery manufacturing. These long-term growth drivers all translate into the increased demand for automated-test-and-measurement systems within these markets.”
Emerson’s portfolio vision is focused on three key objectives: high growth, cohesiveness and end-market diversification. “This transaction furthers all three of these elements, adding to our portfolio of high-growth automation assets with exposure to key discrete end markets like semiconductor, electronics, EVs, aerospace and defense,” Karsanbhai said.
National Instruments will increase Emerson’s end-market exposure in discrete markets to 18% of sales. The acquisition also expands Emerson’s reach into the design-and-validation phase of the lifecycle, providing early access to customers. “Test-and-measurement is aligned with our vision for Emerson's automation portfolio,” added Karsanbhai.
National Instruments provides software-connected automated-test-and-measurement systems that are designed to help customers with test challenges and to improve speed and efficiency in their product development cycles. The two companies believe their technology stacks of intelligent devices and controls and software are complementary.
“We also understand the research-and-development (R&D) and go-to-market needs of product lines across this technology stack, which provides confidence as we assess the opportunities that we have in front of us to drive value creation,” Karsanbhai said. “This continues Emerson's progress toward a higher-gross-margin pure-play automation portfolio.”
National Instrument's LabView software is the preferred product for engineers developing automated research, validation and production test systems, said Ram Krishnan, chief operating officer at Emerson. National Instrument’s flexible and modular system-level test is built on an open and interoperable software platform, and 20% of its sales are in software.
“Over the past several months, we’ve been evaluating strategic options for the future of our business with the intent to maximize its value,” said Eric Starkloff, NI’s chief executive officer. “We ran a robust and comprehensive process, considered a range of potential options and believe this represents the best outcome for all NI stakeholders. This transaction is a strong testament to the improvements and initiatives we’ve implemented in recent years that have transformed NI into a software-focused company with higher growth, better profitability and lower cyclicality.”
Emerson expects to realize $165 million of synergies by the end of five years, which will require $155 million in costs to achieve. Krishnan identified the three main areas of synergies where Emerson can leverage its manufacturing scale and supply chain to drive productivity improvements and reduce duplicative costs:
• research and development
• sales and marketing
• corporate general and administration (G&A) expenses.